STAKE TO TAKE ON BIG TOBACCO

The state attorney general and a herd of tobacco lawyers are preparing to
argue in King County Superior Court next month over a complex tobacco
lawsuit that could become a legal precedent for dozens of similar cases
across the land.

The state is suing the tobacco industry for $5.7 billion, seeking $3
billion in Medicaid reimbursements and $2.7 billion in damages. Four other
states have settled their multibillion-dollar cases.

Lawyers for both sides plan to meet this week to try to negotiate a
settlement, but neither side expects to stay out of court. Both sides say
the stakes are too high now that the possibility of a national settlement
with tobacco companies has fizzled.

State Attorney General Christine Gregoire, a high-profile figure in the
national fight against Big Tobacco, has much to gain from a court win:
political clout, a lot of money for Washington, the pride of thwarting a
powerful industry. A court victory here also could help other states in
their lawsuits against the tobacco industry.

For their part, tobacco lawyers see a good chance of winning the case in
Washington because they will be allowed to use arguments here that have
been disallowed in other states.

Four other states that have sued the tobacco industry - Mississippi,
Minnesota, Texas and Florida - have settled, collecting a total of $36.8
billion in judgments to pay the costs of treating people sick from smoking.

There have been only three verdicts in tobacco-liability trials - when
individuals have sued the industry. Two were overturned on appeal in favor
of the tobacco industry.

It all started in 1994, when the attorney general of Mississippi sued 13
tobacco companies to recover the cost of Medicaid money spent on smokers.
Other states followed his lead - 41 have filed suits - and in the next
three years the issue mushroomed, causing national indignation as the
companies were accused of marketing cigarettes to minors and lying about
nicotine levels.

The outrage led to a possible national punishment for the companies. Last
summer, a deal was struck that included a $368.5 billion penalty for the
industry.

Meant to replace all the states' cases, the deal grew into a far-reaching
punishment that involved agencies such as the U.S. Food and Drug
Administration. It became unwieldy, and few were happy with it.

Public-health groups were divided. Some thought the deal was the best the
government could do; others thought it too weak because it gave Big Tobacco
immunity against future cases.

In the end, Congress rejected the deal. This summer, politicians tried to
push a tougher measure through Congress, but that quietly failed, too.

The states again were left to fight their battles separately.

Nancy Bergquist Gilbert, a program associate with the American Lung
Association, said that might be the best thing.

"When you fight (the tobacco industry) on a state-by-state level, it is a
much slower process, but it is thorough, much more complete, much more
effective," Gilbert said.

Gregoire is accusing the tobacco industry of an elaborate conspiracy:
tricking people into smoking, conspiring to hide important facts from the
public, and lying in advertisements. Washington wants payment for all the
money it has spent and will spend to care for sick smokers, lawyers said.
Washington also wants the industry fined.

The basis of Gregoire's case is that the tobacco industry violated
antitrust and consumer-protection laws and that it is financially
responsible for the health-care mess tobacco has created.

Steve Berman, a private lawyer working for Gregoire on the case, said the
state will make three main claims against the tobacco industry:

- -- That it manipulated nicotine levels in cigarettes to keep people addicted.

- -- That it marketed cigarettes to minors.

- -- That it kept from people essential facts about the health hazards of
smoking so it could publicly maintain that "the case against tobacco wasn't
proven." Essentially, Berman said, "they agreed not to make a safer
cigarette."

Washington is suing all the major tobacco companies in the United States
and the Tobacco Institute, a nonprofit group formed in 1958 by tobacco
companies to lend credibility to the industry.

"I think we have the strongest case in the country to date . . . lean and
mean," Gregoire said.

The tobacco lawyers say they are not conspirators. In fact, they say,
Washington state willingly participated in the selling of tobacco because
it made millions investing in tobacco companies and because it collected
billions of dollars in taxes from cigarette sales.

Tobacco lawyers are not saying much about the accusations they face. They
say simply that the tobacco industry never suppressed any information,
manipulated nicotine levels or conspired to do anything bad.

Tobacco lawyers will argue that Washington knew about the hazards of
cigarettes and did nothing so it could continue to collect cigarette taxes.
If Washington wants money to care for Medicaid patients, the state should
deduct the $4.5 billion it has collected in cigarette taxes from the
damages it seeks, they say.

Tobacco-industry lawyers also plan to point out that Washington, through
the State Investment Board that manages pension funds and other money,
invested $800 million in tobacco-company stocks in the late 1980s. The
state still holds just under $200 million in tobacco stocks.

"The state of Washington has been a participant selling cigarettes," said
Jim Milliman, a Louisville-based attorney representing Brown and Williamson
Tobacco. "The state is going to claim it wasn't aware of (the health
effects of cigarettes). We will show it was.

"They don't want Congress to raise taxes on cigarettes because it would
affect their revenues. The state on one hand wants to condemn cigarettes,
but on the other hand, it wants the revenue."

The tax argument is new ammunition for tobacco lawyers. Two weeks ago a
judge in King County ruled that lawyers could make the argument, which had
never been allowed in a tobacco case.

"We think we can win this case," said Joseph Helewicz, a vice president at
Brown and Williamson. "One of the things to keep in mind is that whenever
we have been able to take our case to a jury . . . we win," he said,
referring to liability cases with individuals.

If the case goes to trial, the outcome will be important to other states
because they could use the case as leverage to win their cases.

But if Gregoire and tobacco lawyers settle, Washington could get more than
money.

"In a settlement we can see gains that are not necessarily economic, that
you would not see if the case went to a jury - like (changing) marketing
that is unfair or deceptive," Gregoire said.

Matthew Ebnet's phone message number is 206-515-5698. His e-mail
address is: mebnet@seattletimes.com

Checked-by: Joel W. Johnson